One of the best practices taking hold in the B2B subscription economy is the automatic renewal – issuing an invoice sixty days before renewals. The interesting effect of automatic renewals is to increase revenue and lower costs. Across multiple companies, Scout Research has benchmarked a four percent or more increase in renewal revenue yield by using this practice. Here are the findings on one case example. Historically, account managers contact customers to confirm the renewal terms and timing. The practice stems from the on-premise product world where customers could continue to receive value whether their maintenance contracts had been paid. As you can imagine, the practice has continued into the subscription economy, but it is not necessary. In the subscription [...]
About Matt ShanahanMatthew Shanahan brings Scout Analytics nearly 25 years of experience in the business transformation. His specialties include business model innovation and new market development.
The Net Promoter Score (NPS) is largely popular due to its successful implementation by companies such as American Express, Apple, and Southwest Airlines. While these scores provide insights on customer satisfaction, they are limited in their ability to prevent churn. A real example provides a case in point, but first a little more information about the NPS. The NPS is a customer loyalty metric developed by Fred Reichheld, Bain & Company, and Satmetrix. The 2003 Harvard Business Review article, “One Number You Need to Grow,” introduced the concept. NPS measures the relative amount of customers who are promoters of a particular brand or company (i.e., fans) versus those who are detractors by measuring the difference between the two. NPS can [...]
In the book “Consumption Economics,” the authors describe a phenomenon called the “consumption gap” which is essentially the difference between a product’s capability and what a customer actually uses. The authors point out that this consumption gap will be a catalyst for technology business failures in the Subscription Economy. But how does a company know if they have a consumption gap? How do they quantify it? And how do they avoid revenue churn because of the gap? Step 1: Measure the Gap To evaluate if you have a consumption gap, you need to measure and quantify it. That means you need to take inventory on your product’s capabilities and how much a particular customer uses them. For offering, the most [...]
If you’re in the Subscription Economy, the most dramatic effects of trends like cloud computing and mobile won’t be felt in your company’s product line. The real disruption will be to your revenue model. In the Subscription Economy, customers will not pay to own your products. Instead, they expect to pay for the value they receive by using your products. Revenue management is the common approach to solving that challenge of optimizing the revenue model. Unfortunately, the rules of the Subscription Economy render traditional revenue management ineffective. To manage revenue and profits in the Subscription Economy, companies need a new recurring revenue management process to optimize the revenue model. What is revenue management? Revenue management is common practice in the [...]